Urwin, who entered the reverse mortgage space in 2017 while at Fairway Home Mortgage, said C2 Financial completed only 16 refinances of Home Equity Conversion Mortgages (HECMs) last year, with about 40% of its business coming from proprietary products. C2 is one of the nation’s largest brokerages, with 1,115 licensed loan officers, 111 branches and $4.85 billion in volume over the past year.
In a candid conversation, Urwin discusses why the industry sometimes sabotages itself, its biggest opportunities and how the lender-broker relationship has evolved.
Editor’s note: This interview has been edited for length and clarity.
Flávia Furlan Nunes: How do you view the current landscape for reverse mortgages?
Shain Urwin: The market hasn’t changed much. Obviously, we haven’t seen anything come out from the U.S. Department of Housing and Urban Development (HUD) since October 2017.
I’m on the board for the National Reverse Mortgage Lenders Association, and I’m also a part of the NRMLA education committee. I see a lot of the conversations and things that are maybe at work, but we haven’t seen any big shifts or changes about the negative of the industry. We’re going backward.
If you take the past few decades, the numbers have gone down almost every year. The problem is, as an industry, we’re sabotaging ourselves. Not just the broker world – lenders, all of us. We’re turning to the same clients. We’re just refinancing and we’re not bringing enough new people. The overall landscape is not rosy.
Nunes: Where do you see the biggest opportunities for growth in the industry?
Urwin: We’re starting to see traction with more affluent clients. A lot of the loans we’re closing as a company are for more affluent clients. We’re also seeing a big shift in proprietary lending that’s happening nationwide.
But being C2 Financial based out of San Diego, most of our loan officers are California-based. We have almost 1,200 loan officers at C2 – I’d say around 70% of them are based in California. And about 40% of our business are proprietary products. I just closed one — the house was $14 million free and clear. You don’t come across this every day. That client is affluent. They owned a $14 million house with cash and they chose to get a reverse mortgage.
Nunes: How do these borrowers differ from traditional reverse mortgage clients?
Urwin: The client for reverse, there’s two stereotypes: One is a needs-based client that basically has nothing left but their house. They’ve spent their assets. They’re down to home equity.
In California, there are a lot of “house-rich, poor people” — they have a $2 million house, but they don’t have any money, so they’re looking at a reverse out of need. Then we have the more affluent. And I would say that client’s net worth is about $2 million to $6 million, and those clients are looking at it for tax strategies — maybe to be able to deduct interest strategically by making mortgage payments when they want to instead of when they have to. We have others that use it as a buffer asset, or what we call a non-correlated asset.
Nunes: What impact is this landscape having on lenders and brokers?
Urwin: I don’t think lenders and brokers are much different in the way the industry is impacting us. When it comes to pricing, brokers have a little more autonomy — they can make things happen a bit more easily than lenders, partly because of overhead.
I’m working out of my home office. I don’t have a brick-and-mortar building. But the lenders own the market. When you look at the facts, Mutual of Omaha, Longbridge and Finance of America — those three own the market. They do more than all the rest of us combined.
We’re one of the largest brokers in the country. There are only a couple of big brokers in the space, and we’re closing hundreds while they’re closing thousands. But to be honest, if you were to take the best — Mutual of Omaha — what are they going to close, 5,500 units? It’s pretty pitiful.
Nunes: Some reverse lenders are revisiting their agreements with brokers. What are the main pain points driving these discussions?
Urwin: As brokers, we don’t create the loan. We shop the loan out and use different investors. Those relationships need to be two-sided. The industry has been filled with one-sided relationships. Lenders have called all the shots and it’s been that way for years.
I sat down with Alex Pistone, president of Mutual of Omaha Reverse Mortgage, about two years ago at a NRMLA conference. He said, “How come you’re not sending any business to us?” I said, “We wouldn’t send you business because you’re going to come and take our business.”
This broker-to-lender relationship needs to be a two-way street. We need know that we’re going to send a loan to someone, and that client is not going to be taken from us, especially when the refinance happens. I told him what we needed were protections. We want to make sure you’re not soliciting our clients, that you’re trying to send a loan back to us, and that we can put our name on the statements.
United Wholesale Mortgage is who developed that. And Alex came back in and created Broker Protect. He rolled that out to C2 and then gave it to the industry. That was a domino that needed to fall, and it allowed us to have control for the first time — a little bit of power.
Nunes: What is the current status of these agreements?
Urwin: We went to every one of our investors and said, “We need the same thing. If not, we can’t do business with you.” We had to part ways with a few relationships for a while, and the two biggest names were Liberty/PHH and Longbridge. It wasn’t done perfectly, but I know that both of those companies, including the other companies we deal with, all wanted to give us a version of that. We’re finally there.
We have that agreement in place with every single investor we choose to do business with. Longbridge and us are coming back together today (March 19). About four months ago, we decided to take a break until we could figure this out. They were in the works of doing this, but I was like, “Until it’s done, we don’t want somebody soliciting our clients.”
I understand the lender side. They don’t want to lose that client to somebody else who’s aggressively marketing. There are three companies that are very aggressive at churning the business. They don’t care about NRMLA’s 12- or 18-month waiting periods. Once the loan closes, they’re going to market it.
Companies like Longbridge are going to do their best to retain it, which makes sense. That relationship now, I see a huge shift that happened in the last two years. The brokers now have lenders to have our backs.
Nunes: What positive changes do these agreements bring?
Urwin: The biggest is communication. I haven’t worked with Longbridge on this yet. We’re going back into business with them now. But I can give you an example with Traditional Mortgage Acceptance Corp. and Mutual of Omaha, which we closed the most business with. When someone calls for a payoff, they tell us immediately, “Hey, this loan is getting paid off.” Often, they even know who is ordering the payoff.
One thing happening in the market is that, with the new trigger leads law, far fewer people will know when a credit pull occurs — but the servicers will still know. They’re opted out of that. A name on the statement, that doesn’t excite me as much, because in the end, it’s co-branded. Honestly, I don’t want them calling us — we’re not staffed like they are.
To answer your question: I think it’s perfect the way it is. If we’re going to market and co-brand with a broker, and they’re going to protect the client if someone is trying to refinance, that’s really the heart behind the issue. Both of us want to keep that client.
Nunes: What gives the lender confidence that the loan will be delivered to them?
Urwin: I would say that is a loose understanding. No. 1, it’s impossible to police – I couldn’t make it happen, and it could even be a violation. You’d be into steering. We don’t have an agreement that says we will send the loan back to Longbridge or Mutual, but just like you and I are good people, and I want that investor to keep that loan, I want to do what I can to make that happen.
If the client says, “I need to take this loan somewhere else. I don’t like Mutual or the way they’ve been treating me,” then I’m going to tell Mutual, candidly. But I’m not trying to steer the loan somewhere. The reality is, we’re going to try our best to keep a partnership and a relationship with people. And I have no problem looking at my client and saying, “Hey, we closed this loan with Mutual. I’d like to keep this loan here; if you want to look at other options, we can.” But 99% of the people are going to be fine.
As a partnership, you’re trying to do what you can to protect each other. That’s the whole point of it. But not at the client’s detriment, at the client’s benefit.
Nunes: How do these agreements support efforts to attract more and more diversified clients?
Urwin: Unfortunately, most of this is for the refi. I don’t think it’s bad to have that. Also, to get the message out right, a lot of these people are refinancing with very little net benefit.
Today, when you think about it, Federal Housing Administration forward mortgages and U.S. Department of Veterans Affairs forward mortgages have hard, fast rules— you cannot refinance a client unless there’s enough net benefit. The reverse rules are iffy. They’re more open to interpretation and we need more guidance, either from the government level or NRMLA.